Tradable Permit Tariffs: How Local Air Pollution Affects Carbon Emissions Permit Trading

Randall Lutter () and Jason Shogren

Land Economics, 2002, vol. 78, issue 2, 159-170

Abstract: Recent literature on greenhouse gas controls shows the costs of climate protection can be offset by the ancillary benefits generated from lower local air pollution. We show here that such ancillary benefits imply the unfettered price of carbon emissions permits observed in tradable permit markets might significantly exceed the incremental social cost of controlling carbon emissions. This difference can help to justify market interventions such as an import tariff on permits traded internationally. Uncertainty about the nature of local air pollution regulation and the variabilityandmagnitudeofancillarybenefitsmaycomplicate substantially the design of cost-effective carbon policies.

JEL-codes: Q21 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (15)

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